978-1259723223 Test Bank TBChap026 Part 2

45.

Refer to the figure. Assuming this market is representative of the economy as a whole, a positive

demand shock will

46.

Refer to the figure. Assuming this market is representative of the economy as a whole, a

negative demand shock will most likely

47.

Refer to the figures. Which figure(s) represent(s) a situation where prices are flexible?

48.

Refer to the figures. Which figure(s) represent(s) a situation where prices are sticky?

49.

Refer to the figures. Which figure(s) represent(s) a situation where negative demand shocks can

result in a recession?

50.

Refer to the figures. Which of the following events would most likely result in higher

unemployment?

51.

Refer to the figures. Which of the following events would most likely result in inflation?

52.

Refer to the figures. Which figure(s) represent(s) a situation where firms are likely to hold

inventories to accommodate unexpected changes in demand?

53.

Which of the following results from firms holding inventories?

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D i f f i c u l t y : 02 Medium

Learning Objective: 26-04 Describe why economists believe that shocks and sticky prices

are responsible for short-run fluctuations in output and employment.

Test Bank: I

To pi c : Uncertainty, Expectations, and Shocks

54.

Kara’s Kittens typically produces and sells at its optimal (lowest per–unit cost) level of 30

scratching posts per week. Kara’s also maintains an inventory of 20 scratching posts. If prices

are sticky and there is a positive

demand shock this week resulting in demand for 40 scratching

posts, we would expect Kara’s to

55.

In situations of sticky prices and negative demand shocks, we would expect firms to

56.

Which of the following statements best describes how firms respond to demand shocks under

conditions of inflexible prices?

57.

For which of the following goods and services are prices most sticky?

58.

For which of the following goods are services are prices least sticky?

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D i f f i c u l t y : 02 Medium

Learning Objective: 26-05 Characterize the degree to which various prices in the economy

are sticky.

Test Bank: I

To pi c : How Sticky Are Prices?

59.

The average number of months between price changes for gasoline is

60.

Prices for airline tickets change on average about once per month. This would suggest that

airline ticket prices are

61.

Prices tend to be sticky because

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D.

foreign competition discourages domestic firms from price changes.

62.

Which of the following best explains why prices tend to be inflexible even when demand

changes?

63.

Prices are particularly sticky

64.

Which of the following statements best describes price flexibility in the economy?

65.

Refer to the figures. As the economy moves from the very short run to the longer run, we would

expect

26–34

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D i f f i c u l t y : 02 Medium

Learning Objective: 26-06 Explain why the greater flexibility of prices as time passes

causes economists to utilize different macroeconomic models for different time horizons.

Test Bank: I

To pi c : Categorizing Macroeconomic Models Using Price Stickiness

Type: Graph

66.

Refer to the figures. In terms of representing the economy,

67.

Refer to the figures. If government policy can be used to affect the level of demand in the

economy, these figures suggest that government policy

68.

The overall behavior of the economy

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A c c e s s i b i l i t y : Keyboard Navigation

Blooms: Understand

D i f f i c u l t y : 02 Medium

Learning Objective: 26-06 Explain why the greater flexibility of prices as time passes

causes economists to utilize different macroeconomic models for different time horizons.

Test Bank: I

To pi c : Categorizing Macroeconomic Models Using Price Stickiness

69.

(Consider This) What is the difference between financial investment and economic

investment?

70.

(Consider This) Which of the following is an example of economic investment?

71.

(Consider This) Suppose that Toyota buys a factory previously owned by Chrysler Motors.

Economists would

72.

(Consider This) In 2008 and 2009, the United States experienced what has come to be known

as the

73.

(Consider This) The U.S. recession that occurred in 2008 and 2009 represented a case where

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AACSB: Knowledge Application

A c c e s s i b i l i t y : Keyboard Navigation

Blooms: Understand

D i f f i c u l t y : 02 Medium

Learning Objective: 26-04 Describe why economists believe that shocks and sticky prices

are responsible for short-run fluctuations in output and employment.

Test Bank: I

To pi c : Uncertainty, Expectations, and Shocks

74.

(Last Word) Which of the following explanations argues that the Great Recession resulted

from asset-price bubbles caused by euphoria and debt-fueled speculation?

75.

(Last Word) According to the Austrian School, the best explanation for what caused the

Great Recession was that

76.

(Last Word) Advocates for a structural solution to the Great Recession argued that

True / False Questions

77.

The business cycle is primarily concerned with changes in the level of overall prices over

time.

78.

A sometimes short, sometimes extended period of declining output and living standards is

referred to as a recession.

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unemployment when assessing the health of an entire economy.

Test Bank: I

To pi c : Performance and Policy

79.

The business cycle reflects both short-run fluctuations in output and long-run economic

growth.

80.

Economists and policymakers are generally more concerned about nominal GDP than real

GDP.

81.

Nominal GDP measures a nation‘s output in current year prices.